NOTE: This is part of a continuing online novel. Here is the Table of Contents.

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The fact that everyone else was in the same boat, that it was like an economic “Act of God,” didn’t make Nikki Paris feel any better.

Nikki Paris had worked her whole life to get where she was on the morning of December 11, 2004. She had worked her butt off, literally for decades, before launching Paris and Associates two years ago, with two partners.

She had started as an ordinary real estate agent, like hundreds of thousands of others. But she was good at it. She could tell the buyers from the lookers. She could cut to the chase and find those people a house they would love. And she could close. Boy, could she close.

Her commissions had grown and grown. As soon as she saw what she was capable of, she had left one of those old-style agencies where brokers and salesmen split commissions 50-50, and gone to Re/Max, where the salesman just pays expenses and takes the rest. Within a few years she had her own Re/Max agency, and saw how those expenses were inflated to make the big bucks. Now, her own agency and her own rules.

Her tastes had changed, too. These days she drove a Jaguar. It was good to be Queen.

As her wealth had mounted, money had also started coming to her.

As the Atlanta intown real estate boom got its second legs, in the late 1990s, she put together some little investment groups of doctors and lawyers who would buy old houses, fix them up, then re-sell them. They made a killing, and more came on board. Real estate not only had the big profits, but it had the most tax advantages of any investment around, and no matter what the rates on the rich were, the rich always felt they could make them a little lower with careful planning. All Nikki’s partnerships were arranged very carefully, by good lawyers, so there were management fees coming in along with profits, and everything was limited liability…too bad most of her own net worth was tied-up in them.

And there was no getting around it. They were sunk.

Paris’s partnerships did business so as to minimize cash costs and maximize real profits. When she found a property she liked, she would go for a naked 5-year balloon note. She was paying just interest, at market rates, and the principal would come due in five years, by which time she expected to have a buyer for each property, at much more than she had paid. Meanwhile, she could rent the places out.

And she was a good neighbor, not like those speculators who put “street spam” all over everywhere, little plastic signs nailed to telephone poles, even trees, by crews working in pick-up trucks late at night, standing on the roofs so the neighbors couldn’t tear the signs down. She wasn’t like those pump-and-dump jerks, who swindled old ladies out of their equity claiming they were buying for their own mothers, then sold out the next day to some cheap-ass renovator from the suburbs who would give it a superficial paint job and then expect top dollar from some yuppies with more money than brains.

No, sir. When Nikki Paris was involved, everything was first class. Take that place she owned over on Winter Avenue in Atlanta for instance. The sellers had been her customers. She gave them a fair market price. Then, she put another $50,000 into making their little Craftsman bungalow into a showplace. She stripped off this ugly aluminum siding it had, exposing the bare wood, which she painted a lovely gray. She sanded all the floors, replaced cracked boards, and put on two coats of veneer. She opened up the front porch, added some lovely appliances to the kitchen. It was a home she’d buy herself, if she were 20 years younger.

Payments on a $250,000 naked, balloon mortgage at 5%, which is what she could get with an ARM, came to just $750/month. She could rent this showplace for $1,250 or more, and each time it emptied her crew came back to fix everything up again. It’s much less expensive in the long run to fix things as they break rather than wait, everyone knows that. But so few do it.

Yet now she was ruined. Ruined!

She looked at the note from her bank again. The prime rate had jumped, in one month, from 4.75% to 7%? She was paying one point over, so her rate was 8%. This meant her payments had suddenly doubled, all of them, and with most on fixed rents through at least six months she was in the hole $250/month on every one. Multiply that loss by some 100 houses and there was no way -- $25,000/month! In losses! And not every house was currently rented out! The ARM had become an ARM and a leg. And a nose and a tail.

Add to that the fact that the value of the underlying equity had suddenly plunged. A house was worth the price of the money used to buy it. When the price of money doubled, the real value of equity was cut in half. A $250,000 house with a 4% mortgage was really a $125,000 house when the note was 8%. The monthly payments were about the same.

That meant the bank could call all these mortgages, every one of them. The houses weren’t worth the loan value.

Maybe things will turn around, she thought. Maybe. Everyone is in the same boat and no bank wants to foreclose on property it can’t sell, she thought. Calm down, Nikki. We’ll get through this.

She was startled by the ringing phone.

“Hey, Nikki?” It was her tenant down on Mellerich, the nice single girl who referred to herself as “mini-Nikki.” Just 22, straight out of Georgia State, an agent with Shea and Carol, another Re/Max office in town, a real go-getter. Sally was her name. Nikki liked Sally.

“Yes, Sally?” Nikki asked sweetly.

“Look, I’m not going to be able to make my rent,” Sally said, haltingly. “I had two deals about to close in the last week, and the bank backed out both times! My buyers couldn’t handle the new rates, and my sellers wouldn’t come down enough! I don’t know what to do!” She was whining now, a little girl whine.

And right there, on the phone, Nikki Paris lost it.